Restructure Medicare & Medicaid: Economic Factors—
Rising Healthcare Costs Disproportionately Borne by Employers and Individuals
Over the last few decades, private payors (employer-sponsored health insurance plans) have consistently paid more than government payors (Medicare / Medicaid) and have, in effect, subsidized government reimbursement.
Healthcare Service Payment to Cost Ratio, 1990 - 2006
0, 140% — Private Payor — ~~ Medicare — Medicaid 120% 110%
100%
90%
Payment to Cost Ratio
80%
70%
60% |
T T T T T T T T T T T T T T T T 1 1990 1992 1994 1996 1998 2000 2002 2004 2006 KP Source: Avalere Health Analysis of American Hospital Association Annual Survey data, 2006, for community hospitals. www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 297
Restructure Medicare & Medicaid: Differential Payment Rates Can Create a
Negative Cycle Leading to Erosion of Private Healthcare Coverage and Higher Entitlement Spending
5. Employers/
easing Use of
2. Cost Shi a ernment the Private ursement
nment Lowers ursement Rate to Providers
Private Marke Government Mar.
KP ource: Doug Simpson, Morgan Stanley Healthcare Research.
(@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 298
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